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Furlough money: Government to mitigate the risk of fraud

Nov 11, 2020

 Schild am Zaun Wegen Corona Virus geschlossen

Executive summary

The furlough scheme or short-time working allowance has stood the test as a major instrument to stabilise the labour market during the COVID-19 pandemic. We acknowledge that the extension of the furlough scheme and the special provisions that mean a relaxation of the rules help attenuate the pandemic’s impact – especially in light of the current resurgence of COVID-19 cases. Our report sets out our initial audit findings and lessons learned. We have made recommendations for enhancing legislation and alerted to potential risks. The Federal Ministry of Labour and Social Affairs and the Federal Employment Agency commented on the draft report. In this report, we have given consideration to their comments.

We see the need for the Ministry to make information on workers on short-time and the related costs more transparent.

We feel that particularly the full refund of social security contributions and the percentage rise in the allowance from the fourth and eighth month of the furlough period make the scheme more appealing and more susceptible to fraud and deadweight effects. Simplified application and payment procedures and longer intervals for record-review exercises might give rise to disincentives and undesired impacts.

We also recommend to the Ministry and the Agency thoroughly analysing the repercussions of extending the scheme. The two bodies should report to the parliamentary Budget Committee on the results of their analyses. This would enable the legislator to swiftly amend the special provisions once they are no longer needed or undesired impacts emerge.

The Agency needs to demonstrate more strongly as to how it intends to prevent the risks posed by simplified claim and payment procedures. To do so, the Agency should promptly finalise its announced strategy to ensure final cross-checking of the allowances paid under the extended furlough scheme and set up the proposed investigation taskforces. The Agency should report to the parliamentary Budget Committee on the steps taken to combat and prevent fraud and abuse.

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